This is a two part inquiry:
1. Is it acceptable to move forward with a request where two vendors will provide similar services, differently?
2. Are there any instances that will permit/prevent this scenario?
3. Does this request constitute fraud, waste, or abuse?
Based on the background information provided with your question, I have a concern about the possibility of collusion between the requiring activity and the two contractors (e.g. "They "know each other and the current vendor is aware that the salient characteristics of the restroom trailer were solely based on what the 2nd vendor can offer"). I also have to wonder did the Requirement Owner (RO) write the requirement for the restroom trailer so that only the one vendor could meet it. While these are two separate issues, they are equally concerning. To address the first issue, I refer you to FAR Part 3 - Improper Business Practices and Personal Conflicts of Interest. Specifically, FAR 3.1.1-1 states, " Government business shall be conducted in a manner above reproach and, except as authorized by statute or regulation, with complete impartiality and with preferential treatment for none. Transactions relating to the expenditure of public funds require the highest degree of public trust and an impeccable standard of conduct. The general rule is to avoid strictly any conflict of interest or even the appearance of a conflict of interest in Government-contractor relationships. While many Federal laws and regulations place restrictions on the actions of Government personnel, their official conduct must, in addition, be such that they would have no reluctance to make a full public disclosure of their actions."
And Government contractors have an obligation according to FAR 3.1002 to uphold a high standard in their business conduct with the Government as follows:
FAR 3.1002 Policy.
(a) Government contractors must conduct themselves with the highest degree of integrity and honesty.
(b) Contractors should have a written code of business ethics and conduct. To promote compliance with such code of business ethics and conduct, contractors should have an employee business ethics and compliance training program and an internal control system that-
(1) Are suitable to the size of the company and extent of its involvement in Government contracting;
(2) Facilitate timely discovery and disclosure of improper conduct in connection with Government contracts; and
(3) Ensure corrective measures are promptly instituted and carried out.
Also, see FAR 3.1003 Requirements.
(a) Contractor requirements. (1) Although the policy at 3.1002 applies as guidance to all Government contractors, the contractual requirements set forth in the clauses at 52.203-13, Contractor Code of Business Ethics and Conduct, and 52.203-14, Display of Hotline Poster(s), are mandatory if the contracts meet the conditions specified in the clause prescriptions at 3.1004.
(2) Whether or not the clause at 52.203-13 is applicable, a contractor may be suspended and/or debarred for knowing failure by a principal to timely disclose to the Government, in connection with the award, performance, or closeout of a Government contract performed by the contractor or a subcontract awarded thereunder, credible evidence of a violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 of the United States Code or a violation of the civil False Claims Act. Knowing failure to timely disclose credible evidence of any of the above violations remains a cause for suspension and/or debarment until 3 years after final payment on a contract (see 9.406-2(b)(1)(vi) and 9.407-2(a)(8)).
(b) Notification of possible contractor violation. If the contracting officer is notified of possible contractor violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 U.S.C.; or a violation of the civil False Claims Act, the contracting officer shall-
(1) Coordinate the matter with the agency Office of the Inspector General; or
(2) Take action in accordance with agency procedures.
Bottom line for issue 1: if you perceive improper activities or conduct on the part of Government personnel and/or the contractors involved, then someone from the outside looking in will probably have a similar perception. Government conduct must be beyond reproach and imposes a duty on all of us to notify our chain of command when there are any kind of ethical concerns. I strongly recommend first discussing your concerns with your Contracting Officer and local Competition Advocate. You can also bring up your concerns with your legal advisor and your base Inspector General. Please also see DFARS 203.1003 for reporting violations to the DoD IG if applicable.
With respect to the second issue, Contracting Officers are to promote competition to the maximum extent practicable to include "considering solicitation of at least three sources to promote competition to the maximum extent practicable. Whenever practicable, request quotations or offers from two sources not included in the previous solicitation" and this is in accordance with FAR 13.104. Also, FAR 11.002 requires that the Government's requirement be written in a manner that promotes full and open competition and to "only include restrictive provisions or conditions to the extent necessary to satisfy the needs of the agency or as authorized by law." Also, see FAR 11.105 and FAR 16.505(a)(4) regarding the requirement to complete a justification and approval for not providing maximum practicable competition for simplified acquisitions. The written justification needs to be posted for acquisitions over $25,000 or $30,000 (if it's an order issued under FAR 16.505).
Bottom line for issue 2: In your case, the requirement appears to be written for one particular vendor in mind. It defies reason to believe only one Contractor can provide a suitable restroom trailer. After getting issue one resolved, I would highly recommend discussing with the RO rewriting the requirement with the goal of promoting competition in mind and, if possible, solicit quotes from at least three vendors. While I don't know all the circumstances here, I fail to see how the Contracting Officer would be able to justify going sole source to one vendor for this type of requirement. If the RO insists on continuing down this path, I strongly recommend, once again, discussing it further with your Contracting Officer, Competition Advocate and legal.